Newcastle City Council 2015-16 budget

Financial context

Introduction

• Original MTFP covering 2013/14 to 2015/16 included a ‘budget gap’ of £108m – £37m / £35m / £36m

• 2013/14 outturn £1.5m (i.e. 0.5% of net budget) under budget and 2014/15 outturn projected to be £0.5m (i.e. 0.2% of net budget) under budget

• New MTFP covering 2015/16 to 2017/18 includes a ‘budget gap’ of £90m – £40m / £30m / £20m

2

The three year ‘budget gap’ of £90m is made up of a combination of funding changes and unfunded cost pressures

‘Budget gap’

(140)

(120)

(100)

(80)

(60)

(40)

(20)

0

20

40

60

80

100

120

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Cost pressures Funding cuts

£245m over seven years

£151m gap 2010-15

£241m over seven years £90m gap for 2015-18

4

Cost pressures

• Increasing demand for services – e.g. increased number older people

• Impact of legislative / regulatory changes – e.g. landfill tax increases

• Pay and price increases – increases in pay and other staff related costs (e.g. pay award / pension costs) and general and specific inflation (e.g. utilities / PFI contracts)

Change in spending power

6

Funding changesUpdated following Local Government Finance Settlement

• Revenue support grant to reduce from £98.4m to £70.4m – a reduction of £28.0m or 28.5% – partly off-set by small increases in council tax and business rates tax base

• Other specific grants such as housing benefit subsidy admin grant and education services grant will also be reduced

• We are facing a higher level of funding reductions than the national average

7

Our spending power

• Our revenue spending power is higher than other parts of the country because of higher needs

• For example, 101 looked after children per 10,000 population compared with 24 per 10,000 population in Wokingham

• Our level of grant funding is higher because of our relatively low council tax base

Funding system• Ministers have previously quoted the significant difference in

spending power between Newcastle and Wokingham as a sign of the fairness of their grant settlements

• However, the new funding system is fundamentally flawed, and will result in the spending power figures being closed and then reversed – despite the much higher spending requirement in Newcastle

• Our modelling indicates that Newcastle’s total spending power per dwelling will fall below Wokingham’s in 2019/20. However, if ring-fenced public health money and the new health / better care funding is excluded, the gap in funding for core statutory services will be closed in 2017/18

Future spending power profile

Cost / benefit to Newcastle of changes

2014/15 2015/16£m £m

If Council Taxbase Equalisation is Restored 3.6 8.4If Rates Safety Net is not Held Back 0.9 0.4If New Homes Bonus Topslice is Equitable 2.1 3.0

6.6 11.8

The Grant cuts to Newcastle could be significantly reduced if the three things that we have highlighted were changed – by over £6m next year and by almost £12m in 2015/16.

The cost to the people of Newcastle is significant in terms of service and job loss and the economic loss of money being taken out of our local economy.

Budget implications for VCS• Continued to protect investment in the Newcastle Fund• Previous higher allocations to help manage consequences

of government ending specific grant programmes• No reduction to Newcastle Fund in 2015-16• £501,476 already committed for 2016-17 in rounds 4 and 5• Total funding for 2016-17 to be reviewed – likely to reduce

at same level as local authority reduction in funding• Detailed summary of current VCS spend presented to

VSLG: circa £55m

Key questions• Are our proposals clear and easy to understand?

• What consequences or impact do you think there might be as a result of the proposals?

• What do you think could be done to reduce any negative consequences or impacts of the proposals?

• How fair and reasonable do you think the proposals are given that the council needs to save £40 million next year?

• Do you think that there are other ways the council could make the savings set out in any of the proposals? If so, how do you think the council should make the savings?

Next steps

• 31 January 2015 – Consultation closes• 23 February 2015 – Cabinet consider results of

consultation and recommends revised budget proposals to City Council

• 4 March 2015 – City Council agrees budget